LPC: Air Medical lands US$2.2bn of debt for AMR purchase (KKR)

Reuters

Aug. 11, 2017, 11:42 AM

By Andrew Berlin

NEW YORK, Aug 11 (Reuters) - US medical helicopter operator
Air Medical Group Holdings will take on US$2.185bn of additional
debt to complete its US$2.4bn purchase of ambulance services
provider American Medical Response (AMR) from Envision
Healthcare Corp, according to three sources familiar with the
matter.

The financing will come in the form of a US$1.455bn
incremental term loan B and a US$730m unsecured term loan that
will be added to the roughly US$2.3bn of debt outstanding at Air
Medical, a KKR portfolio company, the sources said.

Though common in investment grade finance, an unsecured term
loan is atypical in the US$928bn leveraged loan market, which
draws investors seeking claims on companies' assets.

A lineup of banks including Morgan Stanley, Goldman Sachs,
Jefferies, Bank of America Merrill Lynch, Credit Suisse,
Citigroup and Nomura is providing the secured debt commitments,
while Canadian pension manager PSP Investments and Ares Capital
Management are providing the unsecured debt commitments,
according to an August 10 8-K filing with the U.S. Securities
and Exchange Commission.

Sponsor KKR, joined by Koch Industries, will contribute
US$300m-US$400m of preferred equity to support the transaction,
one of the sources said.

KKR acquired Air Medical in 2015 for around US$2bn, Reuters
has reported. The deal was backed by a US$1.01bn term loan and a
US$370 unsecured bond, according to Thomson Reuters LPC data.
The new unsecured loan will have the same recovery priority as
the bond.

The merger with AMR will enable Air Medical to cut down its
costs for shorter trips by replacing helicopter flights with
ambulances, Reuters reported.

“The deal makes a lot of strategic sense, combines Air
Medical’s expertise with helicopter transportation with AMR’s
leading ambulatory business,” a leveraged finance banker said.
“Leverage and valuation are full but there should be meaningful
synergies in cross-selling air and ground transport to
municipalities and other customers.”

The combined company’s debt-to-Ebitda will be roughly six
and a half times, two of the sources said.

Following its buyout, Air Medical acquired fellow air
ambulance companies CALSTAR in 2016 and Air Medical Resource
Group earlier this year. Both purchases were financed with
add-on term loans.

The medical transportation sector has experienced additional
activity recently, with buyout firm American Securities’
US$2.5bn acquisition of Air Methods in April.

Air Medical is currently rated B3 by Moody’s and B by
Standard & Poor’s.
(Reporting by Andrew Berlin; Editing By Michelle Sierra)